How to Leverage Paid, Owned, and Earned Media to Drive Customer Acquisition
Customer acquisition, as the name implies, is the process of gaining new consumers. It involves identifying, finding and ultimately persuading people to hand over their hard-earned money in exchange for your product or service. The customer acquisition strategy you develop and the tactics you employ should be measurable, repeatable, and scalable.
There are specific activities, resources, and dollars you will commit to bring in new customers. However, there are an entirely separate set of activities, resources and dollars you must budget to keep your customers coming back and buying more from you. Some of the tactics you use to acquire and retain customers overlap, but these activities are distinct enough that we’ve covered customer retention in a separate tutorial.
It is important to have a thoughtful strategy for customer acquisition for your business to efficiently gain new customers. Content generation is expensive: in the last five years, the cost of acquiring new customers has increased by over 50%. It’s very easy to waste money if your strategy is not well thought-out and tested.
Finding the “right” cost to acquire a customer is a combination of market research and hypothesis-driven experiments. Your goal is to find the channels that yield high-quality customers at the lowest possible cost to your business. We’ll cover the basics of customer acquisition costs in this guide, but for a deeper dive on how to use data points to optimize your marketing budget, explore our tutorial on data strategy.
Your customer acquisition strategy: the customer journey
The customer acquisition funnel and the customer journey are good frameworks to help you visualize what assets, tactics, and channels you need to deploy. These graphics delineate your future customer’s decision-making process.
The customer acquisition funnel
The funnel represents the journey your customer goes through, starting when someone first becomes aware of your brand. Acquisition ends when someone purchases your product for the first time; thereafter, customer retention becomes the goal. (See our tutorial Customer retention matters: Why your work doesn’t end with an acquired customer for more.)
One challenge with the funnel model is that it paints a picture that the customer journey is linear. Sometimes the journey from awareness to purchase is short and direct, but more often it’s long, meandering and indirect. The customer journey depends on many factors including:
- How high-intent the category is
- Absolute and relative price of the product
- The product’s importance in customers’ lives
- Whether the product category is established or not
- Competitive landscape
- Availability of substitute products
McKinsey’s diagram of the decision-making process is delineated by four phases.
In this model, the customer’s path to purchase involves:
- Initial consideration;
- Active evaluation, or the process of researching potential purchases;
- Closure, or when a consumer buys from your brand;
- Post-purchase, when the consumer experiences your product and brand and decides if they’ll buy it again.
Both frameworks – the funnel and the loop – underpin how your acquisition strategy will identify an individual’s readiness to purchase your product. Your task is to remove obstacles and encourage prospects to complete their journey and, ultimately, becoming a paying customer.
Measuring the success of your customer acquisition strategy
How do you know if your customer acquisition strategy is a success? Start with ROI.
Customer acquisition cost (CAC) is a measure of the costs associated with bringing a new customer to your business, including marketing, events, and advertising expenses. This key metric tells you the return on your investment, proving the success of your customer acquisition strategy. For instance, if a marketing campaign is costing you more in CAC than each new customer is spending at your business, you need to rethink your customer acquisition strategy.
Calculating CAC is not a perfect science. At a high level, CAC is simply your marketing costs divided by the number of customers acquired. However, sometimes CAC is directly attributable to a specific marketing campaign (e.g., Facebook advertising) and other times not (for instance, PR). A billboard someone saw may have “greased the wheels” and made this person aware of your product. But that same person may also see a Facebook ad a few months later. From a measurement standpoint – and Facebook pixel standpoint – that second touch is where the funnel begins. The billboard may have made it easier for an individual to take an action in a digital environment – click through or purchase – but data can’t directly support that hypothesis.
As such, CAC can be imprecise in its measurement and attribution. Be aware that there are many inputs and drivers that influence purchase decisions. Understand what is included in the metrics you are looking at and do not rely on very high-level statements made around CAC.
You can calculate CAC easily for your Facebook campaigns, Google Ads, affiliate marketing, and influencer spending. Each of these marketing efforts will have a different customer acquisition cost, depending on your industry. But here are some benchmarks to keep in mind:
- Facebook: nearly half of marketers report a CAC of less than $10. Of course, absolute price point of your product, along with many other factors, influence a brand’s CAC.
- Google Ads: measured in cost per action, ranges from $23.68 - $143.36
[For more benchmarks, check out our tutorial on data strategy]
Pro-tip: separately, you can calculate an all-in CAC that includes paid CAC as well as all of your other working acquisition spend. Perhaps you spent $20,000 on billboards and $10,000 on some PR/media. You would add that $30,000 to your paid CAC amount and divide by total new customers gained during that period. This is a much more ‘broad strokes’ approach to get a preliminary sense whether your strategies and tactics work for your business model.
Paid, owned, and earned media
As prospective customers move along the path to purchase, your brand gains more and more control of the context and the message. A shopper interested in your product may look at your website, read reviews about your product, and visit your social media channels. For the most part, these are all marketing avenues where your brand controls the message.
There are a number of ways that consumers learn about your product. One simple framework categorizes messaging and context into three buckets: paid, owned, and earned media.
While there’s obviously overlap, these three categories contextualize which levers to pull to make customers aware of your brand, cultivate familiarity with your product, and ultimately convert someone into a paid customer.
Paid media and outreach
Paid media is advertising that your business pays for. Traditionally, this would include TV advertisements, radio, and print advertising. In today’s digital world, this includes paid social media posts, paid search, display ads, retargeting, and affiliate/referral marketing programs.
Owned media and outreach
Owned media consists of content that you publish, as well as community conversations that you generate, on channels your company owns and controls. This could include your website, blog, and social media channels. Owned media is driven by your content marketing strategy. Content marketing includes imagery, text articles, and videos. Often, your brand promotes owned media via paid outreach or organically on social media. This is key to getting more eyeballs and broadening your reach.
Earned media and outreach
Earned media consists of all the content and conversation around your brand or products that has been created by somebody else and published somewhere other than your owned channels. Earned typically includes: media relations, influencers, professional recommendations [e.g., dermatologists], credentialing [e.g., association recommendation].
Earned media is the murkiest in terms of calculating your customer acquisition costs. It is gained as a result of your efforts in paid and owned media, which get amplified through press coverage, unpaid social media mentions, shares, and online reviews. Earned media mentions, when they are positive, are great for your brand’s credibility. Of course, the opposite is also true: if your product is shoddy or service is indifferent, earned media will make sure that message spreads via word-of-mouth.
The customer acquisition ecosystem
There is no one-size-fits-all approach to leveraging your paid, owned, and earned media to acquire customers. Most experts recommend you allocate activities and resources across all three to get the maximum benefit from your activities. Test, adjust, and repeat.
When a brand is starting from zero, it’s crucial to build a certain level of awareness quickly. Acquiring a certain threshold of attention fast tends to compound the efficacy of all your marketing efforts. This allows you to ride the groundswell and start moving many prospective customers down your acquisition funnel.
But where should you start? Below are some best practices for how to allocate your resources and efforts across the three media types.
Start with the basics: owned media
Get your house in order: your owned media is critical for customers to convert. Focus first on your website. There’s no reason to spend money on ads driving potential customers to a site that provides a poor experience. At best, you would be missing conversions and wasting your money. At worst, you would be compromising your brand’s credibility. Invest in crafting your content and site structure with SEO in mind.
The same goes for your social media. Make sure to own the right social media handles to drive trust that your brand is credible. When a potential customer hears about your product from a friend (or other earned media), they will generally search for your brand on one of these channels (depending on your category):
Make sure you have a presence on any or all of these channels to drive consumer trust.
Pro-tip: on Google, buy branded terms if your competition conquesting you, or if you are not organically rising to the top.
Test your core strategy: paid media
Paid media is usually the place to test whether you have a true business on your hands. It offers the ability to communicate your brand and product proposition in a way that resonates with people in the real world. Success with paid media signals that you know how to reach the right consumers and you can efficiently drive them to take action.
Facebook/Instagram has been the go-to channel to test the strength of your paid media strategy. Facebook offers the benefit of immediate feedback, highly specific targeting, and, historically, at a lower cost than most other platforms. It’s not difficult to establish a presence on Facebook and Instagram; creative content can be done cheaply.
Expand outward: paid and earned media
Paid search is often overlooked, but can do a lot of heavy lifting – particularly if you have a sound organic and paid search strategy. Use paid search advertising to learn if there are clear search patterns for your category and business.
Paid influencers and partnerships can also be leveraged once you’ve tested the strength of your on-page conversions, ad targeting, and keyword strategy. Research by HubSpot found that 80% of marketers say influencer marketing is effective; 89% say influencer marketing works just as well, if not better, than other channels. Whether or not you choose to work with an influencer depends on your category and the profile of your target customer.
Public Relations is often overlooked as it is assumed to be expensive and is difficult to measure the impact. While you won’t be able to see direct association, the channel can be a workhorse if don’t right. You can start with simple things like getting your brand or product included in things like listicles, round-ups, gift guides, trend guides. These often don’t require heavy lift on your part and can drive traffic. You can also leverage this type of coverage in your paid advertising creative and leverage on your website to drive SEO. You can also identify the journalists [freelance or with a specific outlet] that cover subjects for which your business is relevant and reach out to try to form a relationship. Generally a pushy “please cover my product” will not work. But you can find traction by offering something of value to them - a trend you’re seeing from your customers, or unique and relevant data you’ve captured in the course of your business.
Out of home advertising: is it worth it? The short answer: probably not. In our experience, OOH advertising such as billboards or banners on the side of a bus work best for a hyper-local campaign or city-specific strategy. OOH can help you raise awareness, but in isolation, won’t have a high ROI. Use OOH to drive purchase consideration, brand awareness, or app downloads. Plan to use OOH to promote other owned properties rather than to drive conversion.
Affiliate marketing can be a good alternative or supplement to influencer marketing. Affiliates are paid partners that link to your product from their website. Every time a visitor purchases your product from clicking an affiliate’s link, they earn a commission. Referral marketing taps your loyal customers to spread the word about your brand, rewarding evangelist consumers with incentives – either monetary or something exclusive, like a membership or limited access to your brand’s new products.
Other paid channels such as Television, Print, Radio, Video, Digital Display can be tested over time as well. To reduce risk, you can test Digital TV or Over the Top to see if the channel works for your brand and product. Traditional television can drive fast awareness among your audience.
We will cover more depth on these channels in our paid acquisition module.
Podcasts have become all the rage, and a medium that is growing in popularity. At the core, these are nothing new – radio hosts have always been a brand’s best friend. Podcasts are just the latest generation in radio marketing. You can easily understand demographic skews for different genres and work with a holding company [e.g., Wondery] to achieve reach fairly quickly. The space is evolving quickly, but we’ve found that it’s best if there is some kind of tie between the show and your product - e.g., the host has used your product and refers to that.
What does customer acquisition look like in each of these scenarios? We’ve collected stories below of how some brands leveraged paid, owned, and earned media to reach new customers at different stages of their growth.
Case study 1: A brand is just starting out and still building an audience
Kettlebell Kings, an Australian workout equipment retailer, used Instagram to build a loyal following from the start. The brand leveraged their owned social media to publish instructional content on how to use their kettlebells and other gym apparel to get a great workout. They encouraged followers to post their own videos, benefitting from re-postable user-generated content, word-of-mouth promotion, and building category dominance in the process. The brand’s community building efforts led to seven-figure growth and a current Instagram following of 180,000+ followers.
Case study 2: A brand has some traction and wants to scale more
Cosmetics retailer Sephora capitalized on its active audience by creating an online forum, building a community where people could share advice, looks, and makeup tutorials. The brand gained an entirely new owned channel where word-of-mouth promotion, influencer marketing, and user-generated content could all live on the Sephora website – just a few clicks from a buy button.
Case study 3: A brand has a loyal, hardcore audience
Dropbox’s successful referral system capitalized on its existing customers to build momentum. The brand offered 500 MB of additional storage for inviting a friend to join. When the friend signed up, they would also receive 500 MB of additional storage – making it a win-win for all parties involved.
Case study 4: A brand needs to scale significantly
Daily Harvest found itself needing to scale quickly during the COVID-19 pandemic, when demand for healthy food delivery skyrocketed as restaurants closed and grocery store lines lengthened. During the pandemic, Daily Harvest used their Instagram and other owned channels to communicate how they were bringing more farmers into their supply chain to meet demand in a safe way. The brand added double the amount of inventory and continued to deliver to “a generation too busy, too tired or too quarantined to prepare their own meals.”
Case study 5: A company is running out of money
Bird, an electric scooter company, has hit a plateau in their growth rate. Like other e-scooter companies, the brand is facing financial headwinds before the impact of COVID-19 quarantine made its financial situation more tenuous. Bird recently tried to pivot their market position with vehicles with self-cleaning handlebars and brake levers that can be used for delivery services. We can’t predict the future, but in their shoes, we would reposition the brand as an alternative to crowded transportation following the pandemic. Spend every marketing dollar on those channels that maximize ROI. Begin working with local governments to subsidize e-scooters and deploy the fleet for essential workers to get to work safely.
Case study 6: A company just received an infusion of cash
Capsule, a pharmaceutical delivery company, raised $200M in a funding round in 2019. The brand planned to use the funding to build its services in New York and expand to other locations. “We are going to be in all of the major cities in the next 18 to 36 months,” Eric Kinariwala, Capsule’s founder and chief executive officer told Bloomberg. Capsule’s strategy in New York City included banner ads in subways and other OOH placements, as well as social media.
Case study 7: A brand is facing new competition
Peloton may have been the first to market with their high-tech workout experience, but competition is catching up. Echelon, NordicTrack, Zwift, Schwinn, and Keiser M3i all launched alternatives to Peloton’s stationary bike; brands like Mirror and Tonal encroach on Peloton’s market position from the virtual at-home workout angle. With the COVID-19 lockdown, many consumers are shifting to working out at home and seeking fitness content online, with or without expensive equipment.
Peloton, in response, is holding its own: their strategy might involve tighter targeting to mass-affluent consumers in suburban areas (with homes large enough to accommodate their equipment). They might also consider adding a premium-priced layer to their subscription content to maintain their elite status in a more crowded field. Likewise, Peloton can capitalize on their first-to-market reputation to continually position their product as a good investment vs. new market entrants.
As you consider your approach to customer acquisition, focus on efforts that can be measured. Your acquisition strategy is only as strong as your ability to measure your customer acquisition cost. Look for channels that are (relatively) easy to track metrics like ad views, click-through rate, and ultimately, purchase.
Content can quickly eat up your budget. Many marketing teams spend more than half their social media budget just on content creation. Be surgically precise about where you allocate content resources. Just because you see one brand using Snapchat doesn’t make it the right channel for your product. Go where your consumers are, and make sure you are able to convey your message on that channel. For instance, Facebook is tactically blocking ads for certain categories. If you’re marketing a new brand of workout equipment, your ad may be swept up in a filter banning nudity if you post a shirtless athlete using your gear. Do your research before you spend money on any major campaign.
We hope this overview was helpful. We will be creating deep dives into paid, owned, and earned, as well as a more detailed view of the consumer journey.
We’re always looking for feedback and would love to hear what’s working well for you in this space. Email us at firstname.lastname@example.org.